Filed: Mar. 02, 2015
Latest Update: Mar. 02, 2020
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 14-1163 SYNOVUS BANK; NATIONAL BANK OF SOUTH CAROLINA, Plaintiffs - Appellees, v. KEVIN J. TRACY; PATRICIA M. TRACY, Defendants – Appellants, and BENJAMIN W. ATKINSON; DANIEL S. HINKSON; KATHERINE H. WILLIAMS; ANTHONY J. BARBIERI, Defendants. Appeal from the United States District Court for the Western District of North Carolina, at Asheville. Martin K. Reidinger, District Judge. (1:10-cv-00172-MR-DLH) Submitted: January 30, 2
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 14-1163 SYNOVUS BANK; NATIONAL BANK OF SOUTH CAROLINA, Plaintiffs - Appellees, v. KEVIN J. TRACY; PATRICIA M. TRACY, Defendants – Appellants, and BENJAMIN W. ATKINSON; DANIEL S. HINKSON; KATHERINE H. WILLIAMS; ANTHONY J. BARBIERI, Defendants. Appeal from the United States District Court for the Western District of North Carolina, at Asheville. Martin K. Reidinger, District Judge. (1:10-cv-00172-MR-DLH) Submitted: January 30, 20..
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-1163
SYNOVUS BANK; NATIONAL BANK OF SOUTH CAROLINA,
Plaintiffs - Appellees,
v.
KEVIN J. TRACY; PATRICIA M. TRACY,
Defendants – Appellants,
and
BENJAMIN W. ATKINSON; DANIEL S. HINKSON; KATHERINE H.
WILLIAMS; ANTHONY J. BARBIERI,
Defendants.
Appeal from the United States District Court for the Western
District of North Carolina, at Asheville. Martin K. Reidinger,
District Judge. (1:10-cv-00172-MR-DLH)
Submitted: January 30, 2015 Decided: March 2, 2015
Before WILKINSON, NIEMEYER, and AGEE, Circuit Judges.
Affirmed by unpublished per curiam opinion.
Edward L. Bleynat, Jr., H. Gregory Johnson, FERIKES & BLEYNAT,
PLLC, Asheville, North Carolina, for Appellants. Thomas William
McGee, III, A. Mattison Bogan, Sarah B. Nielsen, Tara C.
Sullivan, NELSON MULLINS RILEY & SCARBOROUGH LLP, Columbia,
South Carolina, for Appellees.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
Kevin Tracy and his mother, Patricia Tracy
(collectively “Appellants”), appeal the district court’s order
dismissing Patricia Tracy’s counterclaims and dismissing in part
Kevin Tracy’s counterclaims as well as the final amended
judgment in favor of the National Bank of South Carolina and its
successor-in-interest, Synovus Bank (the “Bank”). Patricia
contends that the release of her claims was unenforceable
because it was obtained through unequal bargaining power and is
contrary to public policy. Kevin argues that the district court
erroneously dismissed his claims under the Interstate Land Sales
Full Disclosure Act, 15 U.S.C. §§ 1701 to 1720 (2012) (“ILSA”)
and his state-law negligent misrepresentation claims. He
further contends that summary judgment was inappropriate on his
state-law claims of common law fraud and under the North
Carolina Unfair and Deceptive Trade Practices Act, N.C. Gen.
Stat. §§ 75-1 to 75-145 (2014) (“UDTPA”). Finally, Appellants
argue that the Bank was precluded from enforcing the promissory
notes due to fraud and a failure to act in good faith. After
careful review of the record, we affirm.
I.
We review de novo a district court’s order dismissing
a complaint for failure to state a claim, assuming that all
well-pleaded nonconclusory factual allegations in the complaint
3
are true. Aziz v. Alcolac, Inc., 658 F.3d 388, 391 (4th Cir.
2011). While we must accept the material facts alleged in the
complaint as true, statements of bare legal conclusions “are not
entitled to the assumption of truth” and are insufficient to
state a claim. Ashcroft v. Iqbal,
556 U.S. 662, 679 (2009); see
also Francis v. Giaconnelli,
588 F.3d 186, 193 (4th Cir. 2009).
Appellants first challenge the district court’s order
dismissing Patricia’s claims based on the release signed as part
of her loan modification agreement, arguing that the Bank
secured the release by exploiting its unequal bargaining power
and that the release is contrary to public policy. Under North
Carolina law, “an exculpatory contract will be enforced unless
it violates a statute, is gained through inequality of
bargaining power, or is contrary to a substantial public
interest.” Fortson v. McClellan, 508 S.E.2d 549, 551 (N.C. Ct.
App. 1998). In applying the unequal bargaining power exception,
a court must consider “whether one of the parties . . . must
either accept what is offered or forego the advantages of the
contractual relation in a situation where it is necessary for
him to enter into the contract to obtain something of importance
to him which for all practical purposes is not obtainable
elsewhere.” Hall v. Sinclair Ref. Co.,
89 S.E.2d 396, 398 (N.C.
1955). “An activity falls within the public policy exception
when the activity is extensively regulated to protect the public
4
from danger, and it would violate public policy to allow those
engaged in such an activity to absolve themselves.” Hyatt v.
Mini Storage on Green, 763 S.E.2d 166, 171 (N.C. Ct. App. 2014)
(internal quotation marks omitted).
We conclude that the release is an enforceable waiver
of Patricia’s claims. Patricia purchased the property as an
investment and was not unable to walk away from the transaction
at the time she modified the original loan. Although she claims
the Bank used high-pressure tactics to convince her to re-
finance, she has not identified what these tactics were or how
they resulted in unequal bargaining power. Finally, as the
district court concluded, allowing two contracting parties to
agree to this release in a contract involving refinancing on
investment properties does not implicate a substantial public
interest.
Next, Kevin argues that the district court erred when
it concluded that the Bank was not a developer under ILSA.
Congress enacted ILSA “to ensure that prior to purchasing
certain types of real estate, a buyer is apprised of the
information needed to make an informed decision.” Nahigian v.
Juno-Loudoun, 677 F.3d 579, 587-88 (4th Cir. 2012) (alteration
and internal quotation marks omitted). “[T]he language of
[ILSA] should be read broadly to effectuate its goal of
protecting purchasers of land which is part of a common
5
promotional scheme.” In re Total Realty Mgmt., 706 F.3d 245,
251 (4th Cir. 2013) (alteration and internal quotation marks
omitted).
A developer, for purposes of ILSA, includes “any
person who, directly or indirectly, sells or leases, or offers
to sell or lease, or advertises for sale or lease any lots in a
subdivision.” 15 U.S.C. § 1701(5) (2012). ILSA prohibits a
developer from “employ[ing] any device, scheme, or artifice to
defraud” or “engag[ing] in any transaction, practice, or course
of business which operates or would operate as a fraud or deceit
upon a purchaser” in relation to the sale or lease of a covered
lot. 15 U.S.C. § 1703(a)(2)(A), (C) (2012). These provisions
“encompass[] entities that participated in the advertising and
promotion efforts leading to a challenged real estate
transaction, even if they ultimately were not party to the
transaction.” In re Total Mgmt., 706 F.3d at 253.
We conclude that Kevin failed to sufficiently allege
that the Bank was a developer. The facts alleged in the
complaint state simply that a loan officer with the Bank
participated in events related to the sale of lots in the
development and that loan officer informed Kevin that purchasing
the lot was a “good investment.” The conversations between
Kevin and the loan officer focused on the Bank’s lot loan
program; the officer’s isolated statement, without more, does
6
not indicate that the Bank was sufficiently involved in the
advertising or sale of the lots such that it is subject to ILSA.
Finally, Kevin challenges the district court’s
dismissal of his negligent misrepresentation claim. Under North
Carolina law, 1 “the tort of negligent misrepresentation occurs
when (1) a party justifiably relies, (2) to his detriment,
(3) on information prepared without reasonable care, (4) by one
who owed the relying party a duty of care.” Walker v. Town of
Stoneville, 712 S.E.2d 239, 244 (N.C. Ct. App. 2011) (alteration
and internal quotation marks omitted). “A duty is defined as an
obligation, recognized by the law, requiring the person to
conform to a certain standard of conduct, for the protection of
others against unreasonable risks.” Oberlin Capital, L.P. v.
Slavin,
554 S.E.2d 840, 846 (N.C. Ct. App. 2001). However, “the
home loan process is regarded as an arm’s length transaction
between parties of equal bargaining power and, absent
exceptional circumstances, will not give rise to a fiduciary
duty.” Dallaire v. Bank of Am., N.A.,
760 S.E.2d 263, 264 (N.C.
2014); see Fazzari v. Infinity Partners,
762 S.E.2d 237, 242
(N.C. Ct. App. 2014).
1
In light of the district court’s diversity jurisdiction,
North Carolina substantive law governs Kevin’s negligent
misrepresentation, fraud, and UDTPA claims. Erie R.R. Co. v.
Tompkins, 304 U.S. 64, 78-80 (1938).
7
We conclude that Kevin’s allegations failed to
establish the exceptional circumstances necessary to create a
duty of care. The isolated statements that the purchase was a
“good investment,” made during conversations about the Bank’s
loan terms and the incentive program offered by the Bank, are
insufficient to establish that the loan officer stepped outside
the normal creditor-debtor relationship to create a duty of
care. Furthermore, North Carolina courts have rejected similar
claims in related circumstances. See Dallaire, 760 S.E.2d t 267
(“A loan officer’s mere assertion [regarding the priority of the
potential loan] is insufficient to take the parties’
relationship out of the borrower-lender context.”); Fazzari, 762
S.E.2d at 242-43 (holding that allegations that “the lenders
. . . went beyond the role of commercial lending when they acted
as ‘cheerleaders’ and ‘promotors’” through falsified appraisals
and loan documents were insufficient to establish “exceptional
circumstances outside the normal creditor-debtor relationship”).
II.
We review de novo whether a district court erred in
granting summary judgment, viewing the facts and drawing all
reasonable inferences in the light most favorable to the
nonmoving party. Glynn v. EDO Corp., 710 F.3d 209, 213 (4th
Cir. 2013). Summary judgment is properly granted “if the movant
shows that there is no genuine dispute as to any material fact
8
and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). If the moving party sufficiently
supports its motion for summary judgment, the nonmoving party
must demonstrate “that there are genuine issues of material
fact.” Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir. 2008).
Kevin first argues that the district court erroneously
granted the Bank’s motion for summary judgment on his fraud
claim, asserting that the loan officer’s statements were
actionable fraud. Under North Carolina law, the essential
elements of fraud are: “(1) false representation or concealment
of a material fact, (2) reasonably calculated to deceive,
(3) made with intent to deceive, (4) which does in fact deceive,
(5) resulting in damage to the injured party. Additionally,
plaintiff's reliance on any misrepresentations must be
reasonable.” Folmar v. Kesiah, 760 S.E.2d 365, 368 (N.C. Ct.
App. 2014) (alteration omitted). Generally, a “statement of
opinion . . . cannot be the basis of a cause of action for
fraud.” Leftwich v. Gaines,
521 S.E.2d 717, 722 (N.C. Ct. App.
1999) (internal quotation marks omitted). Such a statement can
support a fraud claim, however, “if, at the time it is made, the
maker of the statement holds an opinion contrary to the opinion
he or she expresses, and . . . intends to deceive the listener.”
Id. at 723.
9
We conclude that the loan officer’s statements were
statements of opinion that were not actionable, and that no
reasonable fact finder could conclude that Kevin relied on these
statements. The loan officer’s beliefs about the propriety of
Kevin’s investment reflect his opinion thereof, and the
undisputed evidence shows that he believed the statements to be
true at the time they were made. Further, Kevin concluded that
the development was a high-end development in a desirable
location after researching the area, reviewing the marketing
material, and viewing pictures of the development; no reasonable
fact finder could have concluded that he decided to invest based
upon the loan officer’s opinion.
Kevin next argues that the district court improperly
granted the Bank summary judgment on his UDTPA claims. In order
to establish a claim under the UDTPA, a plaintiff must
demonstrate: “(1) an unfair or deceptive act or practice,
(2) in or affecting commerce, and (3) which proximately caused
injury to plaintiff[].” In re Fifth Third Bank, Nat’l Ass’n—
Vill. of Penland Litig., 719 S.E.2d 171, 176 (N.C. Ct. App.
2011). A plaintiff is not required to prove “fraud, bad faith,
deliberate acts of deception or actual deception, but must show
that the acts had a tendency or capacity to mislead.” Spartan
Leasing v. Pollard,
400 S.E.2d 476, 482 (N.C. Ct. App. 1991).
However, “only practices involving ‘some type of egregious or
10
aggravating circumstances’ are sufficient to violate the
[UDTPA].” S. Atl. Ltd. P’Ship of Tenn. v. Riese, 284 F.3d 518,
535 (4th Cir. 2002) (internal alteration omitted) (quoting
Dalton v. Camp,
548 S.E.2d 704, 711 (N.C. 2001)).
We conclude that summary judgment was proper. First,
Kevin’s fraud-based UDTPA claims failed for the reasons
discussed above. Next, he has failed to establish any egregious
or aggravating circumstances for his remaining claim based on
the Bank’s relationship with the development. The Bank’s
advertisement highlighted the benefits of seeking a lot loan and
eventual mortgage through the Bank and its affiliate company.
Finally, Appellants contend that the Bank was not
entitled to enforce the promissory notes because it failed to
perform its contractual duties in good faith and fraudulently
induced Appellants to execute the notes. Under South Carolina
law, 2 “[e]very contract or duty within the Uniform Commercial
Code imposes an obligation of good faith in its performance and
enforcement.” S.C. Code Ann. § 36-1-304 (2014). This section
imposes an obligation to act in good faith when a party to the
contract “perform[s] or enforce[s] . . . a specific duty or
obligation under the contract.” Id. § 36-1-304 official cmt. 1.
2
The promissory notes stated that South Carolina law
governed.
11
While Appellants generally assert that the Bank’s fraudulent
actions were the antithesis of good faith, they have not
identified how the Bank acted in bad faith in its performance
and enforcement of the notes. Further, Appellants’ fraud
defenses fail for the reasons discussed above. Accordingly,
because Appellants have not disputed that the Bank established
that the promissory notes were correctly presented and in its
possession; that they executed the documents; and that they were
in default, we conclude that summary judgment was properly
awarded in favor of the Bank.
III.
Accordingly, we affirm the district court’s orders and
judgment. We dispense with oral argument because the facts and
legal contentions are adequately presented in the material
before this court and argument will not aid the decisional
process.
AFFIRMED
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